Dye & Durham Limited (DND.TO) | Investment Case

1. Company Snapshot

1.a. Company Description

Dye & Durham Limited, through its subsidiary, Dye & Durham Corporation, provides cloud-based software and technology solutions for legal firms, financial service institutions, and government organizations in Canada, Australia, Ireland, and the United Kingdom.It offers legal software solutions, such as due diligence, incorporation and business organization, PPSA and securities filings, litigation, and practice management solutions that automates workflow and streamlines access to public records to support end-to-end legal transactions.The company also provides investigative and compliance service, personal property security act (PPSA) service, court filing, and process serving solutions to Government.

In addition, it offers a range of technology-enabled risk mitigation solutions comprising AML and KYC, lien management, financial risk management, payout exchange, and mortgage discharge solutions.The company was founded in 1874 and is headquartered in Toronto, Canada.

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1.b. Last Insights on DND

Negative drivers behind Dye & Durham Limited's recent performance include a decline in investor confidence following a weak second-quarter earnings report. The company's Q2 fiscal 2025 results failed to meet analyst expectations, leading to a trimming of price targets. Additionally, the receipt of an unsolicited proposal to purchase the company for $20 per common share has created uncertainty, with the company confirming the receipt of the proposal but declining to comment on its merits. Furthermore, the departure of Hans T. Gieskes as Interim Chief Executive Officer and the appointment of Sid Singh in his place may indicate leadership instability.

1.c. Company Highlights

Last Price	2.78
Change Percentage	-2.46%
Open	2.88
Previous Close	2.85
Market Cap ( Millions)	187
Volume	557311
Year High	22.59
Year Low	2.63
M A 50	5.08
M A 200	8.93

FCF Yield	65.90%
Dividend Yield	1.35%
ROE	-43.27%
Debt / Equity	549.56%
Net Debt / EBIDTA	1249.25%
Price To Book	0.61
Price Earnings Ratio	-1.21
Price To FCF	1.52
Price To sales	0.4
EV / EBITDA	13.92

2. Dye & Durham Delivers Mixed Q3 Results Amid Restructuring Efforts

Dye & Durham reported its Q3 fiscal 2025 results, showing a mixed bag of resilience and challenges amid macroeconomic uncertainty, particularly in Canada's real estate market. The company posted revenue of CAD 108.3 million, up slightly by CAD 1 million year-over-year, though organic revenue declined 2%. Annual Recurring Revenue (ARR) reached CAD 134 million, a 23% increase, while Annual Contracted Revenue (ACR) grew to CAD 263 million, representing 61% of total revenue. Adjusted EBITDA was CAD 55.2 million, down 8% due to lower revenues and macroeconomic impacts, with margins at 51%. The company reported a net loss per share of CAD -0.33, missing analyst estimates of -0.14. Frank Di Liso, interim CEO, noted that the company is focused on restoring growth and market leadership, targeting high single-digit organic growth and EBITDA margins of 50-55%.

Publication Date: May -14

                                    📋 Highlights
                                    Customer Retention Strength:
                                                Achieved 85% gross retention rate, improving to over 90% on a calendar year-to-date basis, with a focus on multi-year deals.
Revenue and ARR Growth:
                                                Q3 revenue was CAD 108.3 million, with Annual Recurring Revenue (ARR) reaching CAD 134 million, a 23% year-over-year increase.
Operating Plan Restructuring:
                                                Launched a new three-pillar strategy focusing on customer experience, product innovation, and portfolio optimization, with CAD 4 million invested in enhancements.
Adjusted EBITDA Performance:
                                                Reported CAD 55.2 million in adjusted EBITDA, down 8% year-over-year, with margins at 51% due to macroeconomic challenges.
Free Cash Flow Improvement:
                                                Generated CAD 24.5 million in leverage free cash flow, up from a negative CAD 7.1 million last year, driven by operational efficiencies.

                                

Customer Retention and Engagement

Dye & Durham achieved an 85% gross retention rate on 23% of 2022 contracts, with over 90% retention when including April renewals. The company has improved service responsiveness, with email and phone response times enhancing by 75% and 85%, respectively. Colin Bohanna was appointed as UK Managing Director to strengthen regional leadership. The company is bundling additional products and services to enhance retention and has seen growth in Canadian financial services, particularly in mortgage instructions and discharges, with a substantial market share in Quebec.

Product Transformation and Innovation

The company is embedding AI into its solutions and pursuing a cloud modernization strategy. The redesigned Unity platform, with over 100 improvements, was successfully launched in British Columbia, aiming to enhance user experience without disrupting workflows. Pricing remains competitive, with a focus on functionality rather than price increases.

Portfolio Optimization and Cost Management

Dye & Durham is halting acquisitions and divesting non-core assets to reinvest in organic growth. The company aims to simplify its operations and improve long-term financial metrics. Investments of CAD 4 million were made to enhance service, sales, and product support.

Outlook and Valuation

The company is trading at a P/E ratio of -3.89, reflecting the current net loss, with a P/B ratio of 1.84 and an EV/EBITDA of 16.76. The high Net Debt/EBITDA ratio of 12.21 raises concerns about leverage, though the company is optimistic about reducing interest costs by CAD 5-10 million over the next 12 months due to refinancing. With a Free Cash Flow Yield of 15.4%, the company appears to be generating strong cash flows despite its debt burden. Analysts estimate revenue growth of 2.4% for next year, and the company is confident it will win back lost customers by fiscal 2026, driven by increased investments in sales and marketing.

3. NewsRoom

How New Risks and Opportunities Are Rewriting the Narrative for Dye and Durham

Dec -04

Source:

OneMove Capital Warns Dye & Durham's Board Against Renewed Entrenchment Tactics, Urges Peace

Dec -03

Source:

Dye & Durham Responding to Media Report Regarding Legal Action by Plantro

Dec -03

Source:

Dye & Durham Responds to Media Report Regarding Legal Action by Plantro Ltd.

Dec -03

Source:

TSX up 250 Points at Midday With Healthcare, Miners, The Best Performers

Nov -21

Source:

OneMove to Nominate Five Directors to Dye & Durham Board

Nov -21

Source:

OneMove to Nominate Five Directors to Bring Stability to Dye & Durham and Reverse Engine Capital's Value Destruction

Nov -21

Source:

Dye & Durham Responds to Media Report

Nov -21

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.00%)

6. Segments

Cloud-based Software and Technology Solutions

Expected Growth: 6%

Dye & Durham's cloud-based software and technology solutions are driven by increasing demand for digital transformation in the legal and business sectors. Key growth drivers include adoption of cloud computing, need for workflow automation, and rising demand for data analytics and cybersecurity solutions. Additionally, strategic acquisitions and partnerships have expanded the company's offerings and customer base, contributing to its 6% growth.

7. Detailed Products

Property Search

A comprehensive property search platform that provides instant access to property information, including ownership, mortgages, and land titles.

Corporate Services

A suite of services that enable businesses to manage their corporate compliance, including incorporation, annual returns, and minute book maintenance.

Litigation Support

A range of services that support the litigation process, including document management, e-discovery, and trial preparation.

Real Estate Software

A suite of software solutions that enable real estate professionals to manage their business, including transaction management, document management, and commission tracking.

Data Analytics

A data analytics platform that provides insights into property trends, market analysis, and customer behavior.

8. Dye & Durham Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Dye & Durham Limited operates in a niche market with limited substitutes, reducing the threat of substitutes.

Bargaining Power Of Customers

Dye & Durham Limited's customers have limited bargaining power due to the company's specialized services and lack of alternative providers.

Bargaining Power Of Suppliers

Dye & Durham Limited's suppliers have moderate bargaining power due to the company's dependence on a few key suppliers for critical components.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the industry, including regulatory hurdles and the need for specialized expertise.

Intensity Of Rivalry

The industry is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	76.11%
Debt Cost	10.35%
Equity Weight	23.89%
Equity Cost	14.84%
WACC	11.42%
Leverage	318.67%

11. Quality Control: Dye & Durham Limited passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Consensus Cloud Solutions

A-Score: 5.1/10

Value: 8.6

Growth: 2.4

Quality: 7.6

Yield: 0.0

Momentum: 8.0

Volatility: 3.7

1-Year Total Return ->

i3 Verticals

A-Score: 5.1/10

Value: 3.6

Growth: 4.8

Quality: 7.8

Yield: 0.0

Momentum: 8.5

Volatility: 5.7

1-Year Total Return ->

NetScout Systems

A-Score: 5.0/10

Value: 5.5

Growth: 1.7

Quality: 7.5

Yield: 0.0

Momentum: 8.0

Volatility: 7.0

1-Year Total Return ->

Yext

A-Score: 4.3/10

Value: 2.4

Growth: 6.9

Quality: 5.9

Yield: 0.0

Momentum: 7.5

Volatility: 3.3

1-Year Total Return ->

SecureWorks

A-Score: 4.0/10

Value: 7.6

Growth: 1.1

Quality: 4.8

Yield: 0.0

Momentum: 6.0

Volatility: 4.7

1-Year Total Return ->

Dye & Durham

A-Score: 3.7/10

Value: 7.8

Growth: 6.3

Quality: 3.1

Yield: 2.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-6.09%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

11.42%

Dye & Durham Limited - CA2674881040

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on DND

1.c. Company Highlights

Lower Quality

Average Growth

Fairly Valued

Earnings Miss

Revenues Miss

Stable Momentum

Weak Momentum

Earnings Beats

Revenues Beats

Average Yield

Medium Volatility

Cheaper

2. Dye & Durham Delivers Mixed Q3 Results Amid Restructuring Efforts

Customer Retention and Engagement

Product Transformation and Innovation

Portfolio Optimization and Cost Management

Outlook and Valuation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.00%)

6. Segments

Cloud-based Software and Technology Solutions

Expected Growth: 6%

7. Detailed Products

Property Search

Corporate Services

Litigation Support

Real Estate Software

Data Analytics

8. Dye & Durham Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Dye & Durham Limited passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

2.78$

Current Price

2.78$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA